Court Considers New Trial for Former Chief of Qwest

A federal appeals court heard oral arguments about whether former chief executive Joseph P. Nacchio should receive a new trial in an insider-trading case.

DAN FROSCH

DENVER — A federal appeals court heard oral arguments on Thursday about whether Joseph P. Nacchio, the former chief executive of Qwest Communications International, should receive a new trial in an insider-trading case.

The hearing before the United States Court of Appeals for the 10th Circuit was the latest chapter in a meandering legal tale that has already featured a conviction of Mr. Nacchio on 19 counts of insider trading after a monthlong trial in 2007.

Prosecutors contended that Mr. Nacchio had concealed the mounting financial troubles of Qwest, a telephone service provider in 14 Western and Midwestern states, while simultaneously selling millions of dollars in stock. Mr. Nacchio said he had sold the stock only because the options were scheduled to expire.

This year, a panel of three appeals court judges ruled 2 to 1 that Mr. Nacchio deserved a new trial on the grounds that the judge in the case, Edward W. Nottingham, had improperly excluded an expert defense witness. That ruling prompted federal prosecutors to request that the entire 10th Circuit appeals court hear the case, which resulted in the hearing on Thursday.

Given 15 minutes each to present their arguments, lawyers for Mr. Nacchio and the government debated Judge Nottingham’s decision to exclude the witness, Daniel Fischel, a corporate finance expert, who was expected to testify that Mr. Nacchio’s pattern of stock sales had not appeared to rely on insider information obtained as Qwest’s chief executive.

Maureen Mahoney, a lawyer for Mr. Nacchio, argued that Judge Nottingham should not have excluded Mr. Fischel’s testimony. The judge had held that the defense never sufficiently disclosed Mr. Fischel’s methodology and that his testimony could hold sway over the jury. Moreover, Ms. Mahoney said the defense had been surprised by Judge Nottingham’s barring of the witness and had lacked the time to seek a hearing on the matter.

Edwin S. Kneedler, deputy solicitor general for the Justice Department, countered that it was up to defense lawyers to request a hearing after Judge Nottingham issued his ruling if indeed they thought Mr. Fischel was so critical to Mr. Nacchio’s case.

The nine judges in attendance — three recused themselves because of conflicts — fired a near constant broadside of questions at both sides, with special emphasis on Ms. Mahoney.

Some judges appeared to feel strongly that it had been incumbent upon Mr. Nacchio’s lawyers to compel Judge Nottingham to allow Mr. Fischel to testify.

“Your whole framework is that the court had an obligation to do something, when it was you and Mr. Nacchio who had an obligation to get the witness to the stand,” said Judge Jerome A. Holmes, addressing Ms. Mahoney.

Ms. Mahoney continued to argue that amid the frantic nature of the trial, during which many motions were filed and countless deadlines imposed, there was no time to request a hearing on Mr. Fischel’s testimony, to which Judge Mary Beck Briscoe quipped, referring to Mr. Nacchio: “Ask for a continuance. He’s a frequent flier. He can come back.”

“Isn’t the sanction over the top?” questioned Chief Justice Robert H. Henry. “Why is total exclusion what we should do here?”

Judge Michael W. McConnell added: “This suggests to me that the district judge has such a low opinion of economic expertise that he doesn’t think there should be such expertise at a trial like this.”

After less than an hour, the appeals court went into recess.

Mr. Nacchio, who was sentenced by Judge Nottingham to six years in prison and ordered to pay a fine of $19 million and forfeit $52 million in stock sales, remains free on bail. He did not attend the hearing.

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